Board moving Revenues from OP Revenue to Reserve Fund?

Started by MargoT • 11 replies • 1924 views

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MargoT (Georgia)
Posts: 80

Posted:

Can the Board arbitrarily move funds from the OP Budget Revenues and put in the Reserves Fund?

At the 2013 Annual Meeting, all owners unanimously voted to raise dues another $15 and dedicate that amount to the Reserve Fund with regular dues remaining at $60, a total of $75 monthly dues.

However, the 2014 Budget emailed to the members before the October Annual Meeting shows the Board took $3,120.00 from the Operating Budget Revenues. This leaves the OP Budget with no funds for anything other than the bare bones expenditures. There is no money for a website or to ask the HOA Attorney to answer questions on the Declaration, other governing documents or other questions to name a few.

The minutes of the 2013 Annual meeting reflect the business voted on for the monies in my first paragraph.

Can the Board arbitrarily change business that was voted on by all members, including the Board, at any given time in the future without a member meeting?

I would appreciate your help.

DavidW5 (North Carolina)
Posts: 565

Posted:

Margo,

You didn't say how many members the association has. Is it possible that the amount you see being transferred to reserves is the $15 times the number of members? In our association all funds collected flow into the operating account. The amount budgeted for the replacement reserves is transferred each month from the operating account to the reserve account. This may be what you are seeing.

If operating expenses are running lower than the budgeted amounts, the board can transfer the excess to reserves.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Margo

I say as long as they are dedicating the extra $15.00 per month per unit to the Reserve fund as voted on, then they are doing as directed.

It appears you disagree with the Operating Budget (OP) and that is your right.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Margo,

Is it possible that what they are transferring to the Reserves now are the excess monies in the operating fund (i.e. the money left from line items that came in under budget)?

Our Association does this every year. Most of it comes from the snow removal line item. If it was a light winter, it may be several thousand dollars. If it was a heavy winter, it may be only a hundred or none at all. The funds transferred this way go into our Reserve's contingency line item.

MargoT (Georgia)
Posts: 80

Posted:

Hello David:
I apologize; I should have provided more info: We have 26 members:

$ 18,720 = $60 x 12 x 26 = Revenues
$ 4,680 = $15 x 12 x 26 = Reserve Fund

$ 23,400 Total Revenues on OP Budget

The amount allocated to the Reserve Fund is included in the Total Revenues, OP Budget
The mo. Reserve Fund Amount is shown as an expenditure.

We have managed to have a positive Net Income on OP Budget for two years.
The owners voted $4,680 allocated to the Reserve Fund at the 2013 October annual meeting.

$ 8,220 = Total Reserve Fund Expense, 2014 Budget

$ 4,680 = Total Allocated Amt. for 2014 Reserve Fund voted per owners ‘

$ 3,540 OVERAGE not authorized by owners

The owners voted $4,680 allocated to the Reserve Fund at the 2013 October annual meeting.

Can the Board arbitrarily change business that was voted on by all members, including the Board, at any given time in the future without a member meeting for $8,220? We had a net income in the OP Budget but not enough for a website or other items because nearly all Funds were put in the Reserve Fund.

My view is that $390 per month should be the exact amount for the Reserve Fund expense and that at the year end, after much needed items on the OP Budget is provided, that the owners vote at the next annual meeting to move more $$$$ to the Reserve Fund.

MargoT (Georgia)
Posts: 80

Posted:

Hello John:
I apologize; I should have provided more info: We have 26 members:

$ 18,720 = $60 x 12 x 26 = Reserves
$ 4,680 = $15 x 12 x 26 = Reserve Fund

$ 23,400 Total Revenues on OP Budget

The amount allocated to the Reserve Fund is included in the Total Revenues, OP Budget
The mo. Reserve Fund Amount is shown as an expenditure.

We have managed to have a positive Net Income on OP Budget for two years.
The owners voted $4,680 allocated to the Reserve Fund at the 2013 October annual meeting.

$ 8,220 = Total Reserve Fund Expense, 2014 Budget

$ 4,680 = Total Allocated Amt. for 2014 Reserve Fund voted per owners

$ 3,540 OVERAGE not authorized by owners

The owners voted $4,680 allocated to the Reserve Fund at the 2013 October annual meeting.

Can the Board arbitrarily change business that was voted on by all members, including the Board, at any given time in the future without a member meeting for $8,220? We had a net income in the OP Budget but not enough for a website or other items because nearly all Funds were put in the Reserve Fund.

My view is that $390 per month should be the exact amount for the Reserve Fund expense and that at the year end, after much needed items on the OP Budget is provided, that the owners vote at the next annual meeting to move more $$$$ to the Reserve Fund.

MargoT (Georgia)
Posts: 80

Posted:

Hello Tim:
No, that is not the case for 2014. So, if we show $390 per month for Reserves and have excess monies left in the OP Budget, we can add a line under Reserve Fund for Reserve's Contingency on the OP Budget?
I apologize; I should have provided more info: We have 26 members:

$ 18,720 = $60 x 12 x 26 = Reserves
$ 4,680 = $15 x 12 x 26 = Reserve Fund

$ 23,400 Total Revenues on OP Budget

The amount allocated to the Reserve Fund is included in the Total Revenues, OP Budget
The mo. Reserve Fund Amount is shown as an expenditure.

We have managed to have a positive Net Income on OP Budget for two years.
The owners voted $4,680 allocated to the Reserve Fund at the 2013 October annual meeting.

$ 8,220 = Total Reserve Fund Expense, 2014 Budget

$ 4,680 = Total Allocated Amt. for 2014 Reserve Fund voted per owners ‘

$ 3,540 OVERAGE not authorized by owners

The owners voted $4,680 allocated to the Reserve Fund at the 2013 October annual meeting.

Can the Board arbitrarily change business that was voted on by all members, including the Board, at any given time in the future without a member meeting for $8,220? We had a net income in the OP Budget but not enough for a website or other items because nearly all Funds were put in the Reserve Fund.

My view is that $390 per month should be the exact amount for the Reserve Fund expense and that at the year end, after much needed items on the OP Budget is provided, that the owners vote at the next annual meeting to move more $$$$ to the Reserve Fund.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Margo,

Prior to 2013, were funds not being placed into the Reserves?

Expecting that they were, per your posting, the membership voted to raise that amount by $15 per lot. Therefore, the total amount going to the Reserves would be more than the $4,680 the $15 increase provided to the Reserves.

On a side note: Typically, Associations prepare a zero balance budget. That is to say that the income equals the expected expenses. Normally, if the income exceeds the actual expenses, the excess either needs to be placed into the Reserves or utilized as an offset to the next years assessments. Your Association should not have had a positive net income for the past two years.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Margo

I say the BOD is doing a good job especially building the Reserve. Based on what you said it seems the Reserve fund might have had an issue and that was addressed with the $15 per month, per unit to Reserves.

Your issues seem to be that you want owner approval every time they move money and you want some projects they did not fund like the web site. The budget is not a democratic process every time something is done.

Tough love here but I get the opinion you want the members voting on everything versus let the BOD do their job. I could be wrong.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Margo,

Your board is acting transparently and responsibility on articulating the need for a dues increase and backing that need with a tangible vote to "lock box" the additional revenue for Reserves.

The operations budget needs to appear "bare bones" with every dollar accounted, leaving no extra revenue. However, since the board is managing the property and coming in under budget, a couple of hundred bucks on a basic website is a sensible proposal as the community can afford it.

You have a political disagreement w/ your board but, money-wise, they're acting transparently. Give them credit for that as you move towards challenging their proposals on other issues.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Hi Margo

Would you mind sharing:
What specific items will the reserve funds need to be used for?
How much would is cost if you had to replace all of these items today?
How much money do you have in the reserve account now?

Sikubali jukumu. Read all posts at your own risk.

MargoT (Georgia)
Posts: 80

Posted:

Hello Kelly:

Thank you for agreeing a website is a sensible proposal.

You don't know me so I forgive you to assume I don't give the Board credit. I worked five years on the Declarant/Developer's Board to get the legal Turnover to the owners on Oct. 12, 2012 then served as Secretary-Treasurer for one year and six months. Today, I spent an hour to provide the Treasurer with my analysis of the 2014 and 2015 Budget corrections and he was most appreciative that we perfect the errors before the annual meeting. I personally asked the current Treasurer to take my position when I resigned from burn-out.

The Board has been prudent for two years to strive not to over budget. I am proud that we initiated our Reserve Fund one year later.

I earned my respect on this Board.

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